The rising rate environment is creating greater rate disparity among the big four banks on standard variable loans, leading many borrowers to wonder where the competitive benchmark rate really is in the market.
Comparing the standard variable rates of the big four banks to get an average ‘benchmark’ rate has been a commonly used way for borrowers to know if they were getting a good deal from their lender, but it is now becoming increasingly irrelevant.
As the gap between standard variable rates of the major banks widens to more than a quarter of a percent, that benchmark will continue to become a less reliable indicator of what’s competitive across the market, leading borrowers to look at the whole playing field to see what’s available to them.
And as the alignment between bank rates continues to fragment, this now means more borrowers must consider the rates of all lenders as well as placing value on the service and features that go with a loan – both of which can make a significant difference to their back pocket.
The statistics speak for themselves and paint a clear picture of what has happened to many borrowers just by looking at the difference in standard variable rates (SVRs) of the four major banks at various times over the last year:
Difference in standard variable rates (SVR) of the big four banks at specific times
| PERIOD | LOWEST BANK SVR | HIGHEST BANK SVR | DIFFERENCE |
| February 2009 | 5.74% | 5.91% | .17% |
| October 2009 | 5.99% | 6.06% | .07% |
| January 2010 | 6.49% | 6.76% | .27% |
The last three months alone have seen the difference between the highest and lowest standard variable rates of the banking majors blow out to more than a quarter of one percent, which is also the equivalent of one official rate rise of $47 per month in repayments on an average $300,000 loan.
These fluctuating benchmark rates will make borrowers not depend on it as a key factor in their decision making, but will instead lead them back to looking at their loan arrangements to see how they can customise a solution for their situation by looking at rates, features and service.
Websites such as Infochoice and RateCity are useful starting points for consumers wanting independent comparisons of what different lending institutions are offering.
It’s a great time for existing borrowers to see if their loan still stacks up by looking at the whole – and not just a sum of its parts.
Tags: Home Loan, Home Loans, Interest Rates, Invest, Refinance, Variable loan, variable rate